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算授課教師：XXXInternationalSettlementCatalogue01Introduction02NegotiableInstrument03Remittance04CollectionCatalogue05LetterofCredit06StandbyLetterofCredit07LetterofGuarantee08InternationalFactoring Catalogue09Forfaiting10DocumentsinInternationalSettlement11ExaminationofDocumentsCatalogue12FinancinginInternationalSettlement13RisksinInternationalSettlementChapter1Introduction1.1DefinitionandMainContentsofInternationalSettlement1.1.1DefinitionofInternationalSettlement

Internationalsettlementisdefinedasfinancialactivitiesconductedamongdifferentcountriesinwhichpaymentsareeffectedorfundsaretransferredfromonecountrytoanother,inordertosettleaccounts,debts,claims,etc.,emergedinthecourseofpolitical,economicorculturalcontactsamongthem.

Inaword,internationalsettlementreferstofinancialactivitiesofsettlingclaimsanddebtsamongcountries.Ingeneral,internationalsettlementmainlycoversthefollowingaspects:(2)Paymentmethods

(1)Negotiableinstruments(3)Documents0102031.1.2MainContentsofInternationalSettlement(1)Negotiableinstruments:Anegotiableinstrumentisaninstrumentthetitlesonwhichcanbetransferredeasilyfromonepartytoanother,whichisakindoffinancialdocuments.Inanarrowsense,anegotiableinstrumentisanunconditionalpromiseorordertopayafixedamountofmoneyatadefinitely,billsofexchange,promissorynotes,chequeswhichcanbeusedtosettledebtsandclaimsamongtradersfromdifferentcountriesorbetransferredordiscountedinmoneymarket.(2)Paymentmethods:Themainpaymentmethodsconsistofremittance,collection,letterofcredit,standbyletterofcredit,guarantee,internationalfactoringandinternationalforfaiting.Traditionally,withremittancethenon-tradesettlementismostlyconducted,letterofcreditisusuallyusedintradesettlement,collectionisusedbothintradeandnon-tradesettlement,whilestandbyletterofcreditandguaranteearemostwidelyusedandareoftenusedincombinationwithotherpaymenttechniques.1234(3)Documents:Documentsespeciallyrefertocommercialdocuments.Therearefourkindsofdocumentsininternationalsettlement:commercialdocumentstransportdocumentsinsurancedocumentsofficialdocuments1.2ClassificationofInternationalSettlementAccordingtothecauseofoccurrence,internationalsettlementcanbedividedintothreeparts:12312InternationalcargotradesettlementInternationalservicetradesettlementInternationalnon-tradesettlement1.2.1InternationalCargoTradeSettlement

Thefinancialactivityarisingfrominternationalcargomerchandisetradeiscalledinternationalcargotradesettlement.Internationalcargotradesettlementhasadominativepositionintheinternationalsettlement.Paymentsforvisibletrade,suchasmerchandisetradesettlement,openaccountsettlement,capitalgoodstradesettlement,arethemaincontentsofinternationaltradesettlement.Consumptionabroadisconsumersgotoaforeigncountryandenjoytheservicesthatforeigncountrysupplies.Overseastravelandoverseasstudyarethetypicalinstanceofconsumptionabroad.Cross-bordersupplyreferstotheservicesdeliveredwithintheterritoryofthemember,fromtheterritoryofanothermember.Internationalservicetradesettlementreferstothesettlementrelatedtothecross-borderservicesproviding.Commercialpresenceisthesuppliersetsupacertaincommercialorganizationinaforeigncountryandsuppliesservicestoconsumersofthatcountry.1.2.2InternationalServiceTradeSettlementPresenceofnaturalpersonisservicesdeliveredwithintheterritoryofthemember,withsupplierpresentingasanaturalperson.Itdiffersfromcommercialpresence,anditdoesn'tinvolveanybehaviorofinvestment.Overseaslaborserviceisthecommoncaseofpresenceofnaturalperson.Internationalservicetradesettlementisalsocalledinternationalinvisibletradesettlement.Cross-borderservicesareoftenpaidintheformsofinsurancepremiums,freights,postage,cablecharges,bankcommissionsandsoon.1.2.3InternationalNon-tradeSettlement

Internationalnon-tradesettlementreferstofinancialactivitiesthataregeneratedinthecourseofothercross-bordereconomic(excludinginternationaltrade),politicalandculturalcontacts.1.3EmergenceandDevelopmentofInternationalSettlement1.3.1EmergenceofInternationalSettlementThegenerationofinternationaltradeismuchearlierthanthatofinternationalsettlement.Internationaltradebegantoburgeonwhencirculationofcommoditieswasbeyondthebordersofcountries.Itisnotuntilfeudalsocietythatinternationalsettlementcameintobeing,

Internationalsettlementiscarriedoutinatraditionalwayinalongperiodoftimeeversinceitisemerged.13.2DevelopmentofInternationalSettlementFromCashSettlementtoNon-cashSettlement Bythe5thcenturyB.C.cashsettlementemerged.Gold,silverandotherkindsofconvertiblecoinsaredeliveredfrombuyerstosellers,paymentsareeffected,debtsaresettled,whichistheprimitiveformofcashsettlement.Cashsettlementisoperateddirectlybetweentwoparties:thebuyerandthesellerandwithoutanyinvolvementofathirdparty,soitisthesimplestwayofinternationalsettlement. However,incashsettlement,thepartieshavetocountthecash,identifytheauthenticity,andshipthecurrencytoforeigncountries,whichislaborious,time-consuming,costlyandrisky.

Withthedevelopmentofinternationaltrade.Thenwrittenpledgesarecreated,replacingthegoldandsilvertosettleinternationaltradeclaims.Graduallyevolvedintothecommercialpapers,whichfacilitatetheprocedureofinternationalsettlement.Thefollowingflowchartportraysthewayofnon-cashsettlement(SeeChart1.1)

InChart1.1,wesupposethataNewYorkimporter,A,wantstopurchasecottonworthofUSD1millionfromaTokyoexporter,B,andanother

Tokyoimporter,C,wantstobuycornworthofUSD1millionfromanotherNewYorkexporter,D.Thenthepaymentproceduresshouldbe:DdrawsadraftworthUSD1milliononCforhisexports,transfersittoAwhoobtainsitbypayingDUSD1millioninNewYorkinstrumentmarket;AsendsthedrafttoBaspaymentforhisimports;uponreceiptofthedraft,BpresentsittoCforpayment;andafterverifyingthedraft,CmakespaymenttoB.

Insteadofthetransferofcashbetweencountries,non-cashsettlementavoidsthedrawbacksofthecashsettlementandacceleratesthesmoothdevelopmentofinternationaltrade.FromDirectSettlementtoIndirectSettlement

Settlementthroughcommercialpapersmustmeetthefollowingconditionsatthesametime:theimportersandexportersmusthaveaclosedbusinessrelationshipwithafoundationofmutualtrust;theworthoftradinggoodsandpaymenttimemustbethesameforimportersandexportersinonecountry.However,itisdifficultfortwotransactionstohavetheabovetwoconditionsatthesametime.

Then,commercialbanksgetinvolvedininternationaltrade.Bymeansofbuyingandsellingortransferringdifferentcurrencies,commercialdraftswithdifferentmaturitydate,alargenumberofclaimsanddebtscausedbyimportsandexportsareassembledtobankstobeoffsetandcleared.Eventually,banksbegintoserveasintermediariestofacilitateinternationalsettlementbetweenexportersandimportersFromCashonDeliverytoPaymentagainstDocument

Astransportation,insuranceandbankingindustrybecomeanindependentsocialsector,manydocumentsusedininternationalsettlementhavebeencreatedandmaturedgradually.Merchantspreferentrustingtransportersratherthansailingthemselvestodelivergoods.Meanwhile,priceterms,suchasFOB,CIF,havebecomeacommonpracticeforallcountriestofollow.Thoseallcontributetothereplacementfromcashondeliverytopaymentagainstdocument.Sincethedocumentscanrepresentthegoods,bankscannotonlycleardebtsandclaimsbetweentradepartiesbutalsofinanceexportersandimportersonthebasisofpledgeddocuments.Exporterscanobtaintheadvancepaymentfrombanksbysubmittingcomplyingdocuments.FromPaperDocumenttoElectronicDocument

Attributedtoadvancingtechnologyandenhancingproductivity,foreigntradehasenteredanewera,internationalsettlementhasbecomeincreasinglycomplicatedanddiversified,especiallymoreandmoredocumentsarerequiredtobesubmittedininternationalsettlementoperationprocedures.Owingtothewidespreadofcomputers,electronicinternationalsettlementbecomespossible,whichfurtheracceleratestheflowoffundsanddocumentsandreducesthetimeintransitmaximally,thusloweringthecapitaloccupationandinterestexpenses.1.4RoleofBankinInternationalSettlement

Ininternationalsettlement,bankshavebeenperformingmanycriticalrolestofacilitatetheprocessofinternationalsettlement.(1)Settleaccounts.Ininternationaltrade,tradepartiescannotsettledebtsdirectlyforgeographicreason,however,bankscanprovideremittance,collection,letterofcreditorotherpaymentmethodstopartiestocleardebtsandcredit.(2)Financefacility.Bankscanprovidebillpurchased,packingloanandotherfinancialfacilitiestoexportersorimporters.(3)Guaranteeforrisk.Ininternationalsettlement,therearenegotiatingbank,acceptingbank,reimbursementbankandconfirmingbanktoensurethattheexportergetsthemoneyandtheimportergetsthecontractedgoods.(4)Consultancyserviceandothervalue-addedservices.Inpractice,banksusuallyprovideconsultancyserviceandothervalue-addedservices.

Thecapitalallocationandtransferininternationalsettlementaremostlyfinishedthroughelectronicclearingsystemoffinancialmarkets.Thefollowingaresomeimportantelectronicclearingsystemswidelyusedtoday.

CHIPS,theClearingHouseInterbankPaymentSystem,isacomputerized,interbankfundtransferpaymentsystemoperatedbytheNewYorkClearingHouseAssociation(NYCHA).EstablishedinNewYorkin1970,CHIPScontainsmorethan140memberbanksnowandiscomprisedofBankofAmericaandotherforeignbanksinNewYork.CHIPSisusedprimarilyforlarge-amount.Thesystemhandles90%ofthecross-borderUSdollarpaymentsworldwideandprocessesmorethanthreemillionpaymentsamonth.Thus,itisfamousforlargeamount,highworkingefficiency,highdegreeofautomationandhighsecurity.CHAPSistheabbreviationofClearingHouseAutomatedPaymentSystem.EstablishedinLondonin1984,itisacomputerizedpaymentsystem.

ItistheclearingcenterforLondoncityaswellasforallBritishPoundsintheworld.However,thegeneralbanks,includingthebranchesofforeignbanksestablishedinLondon,cannotdirectlyparticipateinthecurrencyexchange.CHAPSisinferiortoCHIPSbothinclearingquantityandtele-communicativeequipment.FEDWIRE,FederalReserveCommunicationSystem,isanelectronicpaymentsystemoperatedbytheU.S.FEDWIREisareal-timeandgrosssettlementsystem,thereforefundstransferinFEDWIREisfinalandirrevocable.Exceptfundstransferandclearingservices,FEDWIREalsoprovidesfinancialinformationservice.TARGETstandsfortheTrans-EuropeanAutomatedReal-timeGrossSettlementExpressTransferSystem,whichwasfoundedin1995andcameintoservicein1999officially.TARGETisareal-timegrosssettlementsystemoftheeuro

ThetransactionsthatTARGETconductsareasfollows:●PaymentdirectlyrelatedtothemonetarypoliciespublishedbycentralbankinwhichEPMisusedbybothreceiversandsenders.●Thehigh-valuepaymentserviceconductedindenominationofeuroauthorizedbyNetSettlementSystemtoreducetheriskofpaymentsystem.●Interbankandcommercialpaymentconductedintheunitofeuro.●TransactionordersfromEuropeanCentralBanksystem,thedailysettlementofeuroandtheeurosettlementbetweenContinuousLinkedSettlement(CLS)bankandmemberbanks.●Interbankandcommercialpaymentconductedintheunitofeuro.●Thehigh-valuepaymentserviceconductedindenominationofeuroauthorizedbyNetSettlementSystemtoreducetheriskofpaymentsystem.●PaymentdirectlyrelatedtothemonetarypoliciespublishedbycentralbankinwhichEPMisusedbybothreceiversandsenders.●TransactionordersfromEuropeanCentralBanksystem,thedailysettlementofeuroandtheeurosettlementbetweenContinuousLinkedSettlement(CLS)bankandmemberbanks.ThetransactionsthatTARGETconductsareasfollows:

CNAPS,ChinaNationalAdvancedPaymentSystem,isafundstransferandclearingsystemwhichisbeingadvocatedandconstructedbythePeople’sBankofChina(PBOC).Thereexisttwolevelsofpaymentsystems,theNationalProcessingCenter(NPC)andtheprovincialcapitalsandShenzhenCityClearingProcessingCenter(CCPC).●High-valuePaymentSystem(HVPS):Itinvolvesareal-timeandgrossfundssettlement.●BulkElectronicPaymentSystem(BEPS):Itreferstoclearingprocessformultiplepaymentandnetsettlementforfundsinacertainperiodoftime.●ChequeImageSystem(CIS):Makingintegrateduseoftheimages,paymentpasswordandothertechnologies,CIStendstoconvertpaperchequeintoimageandelectronicinformation,whichistransmittedtotheissuingbankforacceptanceorpaymentonthebasisofinformationnetworktechnology,thusrealizesauniversalsystemforchequethroughoutthecountry.ThreesystemscomposetheCNAPS:

SWIFTstandsfortheSocietyforWorldwideInterbankFinancialTelecommunications.Itisaninternationalcooperationorganizationforinternationalinterbank,establishedin1973withtheheadquarterinBrussels,Belgium.themembershipisgrowingandithasupto10,279memberbanksnowfrom212countriesandregions.TheBankofChinajoineditin1983.TheBankIdentifierCode(BIC)usedinSWIFTmessage.TheBICcanbesplitintofourparts:bankcode,countrycode,areacodeandbranchcode.

SWIFTisamessagingservice.Eachtypeofmessageisaconditionofwiretransfer.ASWIFTmessageconsistsofthenameandcodeoftheoriginatingbank,thedateandtime,theaddressandcodeofthereceivingbank,thenameandinternalcodeoftheofficerinitiatingthetransmission,thenamesandaccountnumbersoftheaccountsinvolvedinthetransfer,adescriptionoftheassetbeingtransferred,theMTcategoryofthetransmission,andacceptable,standardizedphrasesasdescribedabove.Itisahighlysophisticatedmessagecommunicationsystemrunning24hoursaday,sevendaysaweek.

EDIrepresentstheElectronicDataInterchangeandistheelectronicexchangeoforders,invoicesorotherkindsofdocuments.TheframeworkofEDIiscomprisedofthreeparts:computerapplication,communication,networkanddatastandardization.EDIisnotasimpledataexchange,usersmustsendmessageswiththeuniversalmessageformat,whilethereceiversalsohavetohandlethemessageaccordingtotheinternationalgrammarrules,andthewholeprocessisfinishedautomaticallywithouthumanintervention,whichleadstofewerrorsandhighworkefficiency.

ItiseasytonoticetheadvantageofEDI.Itreducestheconsumptionofpaperandreducesrepetitiveworkwhichleadstohighefficiency.1.4RoleofBankinInternationalSettlement

Withthedevelopmentofinternationalsettlement,manylawsandrules,customsandpracticeshavebeenformedwhicharecompliedbyandreferredtoasthebasisofconductingsettlementtransactions.Therefore,itisimportanttomakeaclearunderstandingoftherelatedinternationalcustomsandpractices.1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement1.5RelatedInternationalCustomsandPractices

Internationalcustomsandpracticesarethehabitualpatterns,rulesandregulationsrecognizedbyinternationalcommunity.Theyareformedinlong-terminternationalcommunicationandpractice.Theyregulatetherelationship,rightsandobligationsofthepartiesexactly.Internationalcustomsandpracticesarenotablefortheircharacteristics,i.e.fairnessandrationality,clarityandstandardization,universalutilization.1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement1.5.1DefinitionandCharacteristicsofInternationalTradeCustomsandPractices

Internationalcustomsandpracticesarethehabitualpatterns,rulesandregulationsrecognizedbyinternationalcommunity.Theyareformedinlong-terminternationalcommunicationandpractice.Theyregulatetherelationship,rightsandobligationsofthepartiesexactly.Internationalcustomsandpracticesarenotablefortheircharacteristics,i.e.fairnessandrationality,clarityandstandardization,universalutilization.1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement1.5.1DefinitionandCharacteristicsofInternationalTradeCustomsandPractices

Internationalcustomsandpracticesarenotlawsinthemselvesbutregulationsfollowedbypeople,whilelawsaretheregulationsformulatedbygovernmentauthorities,representingthewillofthestateandbeingimplementedbyforce. Normally,theinternationalcustomsandpracticeshavenolegaleffect,internationalcustomsandpracticescanserveassupplementstolawswhenthereisnodetailedregulationinlawsonacertainsubject.1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement1.5.2RelationshipbetweenCustomsandPractices,LawsandContracts

Acontractisadocumentthatarrangestherightsandobligationsoftwopartiesuponagreementinatransactionaccordingtowhichtheeconomicactivitiesareconducted,withinwhichrightsareexercisedandobligationsarefulfilled.Thecontractcanacceptoreliminatetheapplicationofinternationalcustomsandpracticesclearlyoncertainitems.

Onthecontrary,whenthecustomsandpracticesdonotoffendnationalpublicinterestsandareacceptedbylawsandpartiesonbothsides,internationalcustomsandpracticescanserveastheexplanationsandsupplementsforcontractswhenthecontractsarenotdetailedandcompleteenough.1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement

Intermsofrulesonnegotiableinstruments,therearethreelawswidelyused:

GenevaUniformLawsincludesUniformLawforBillsofExchangeandPromissoryNotesof1930andUniformLawforChequesof1931.

Signedbydelegatesfromover30countriesincludingFranceandGermany,itisofficiallyformedintheInternationalUniformConferenceonLawofNegotiableInstrumentin1930.UKBillsofExchangeAct1882.Formulatedonthebasisofbankingpractices,ithasbeenusedformorethan100yearsandmaintainedmostitemseversinceithasbeenpassed.USUniformCommercialCodeof1962.1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement1.5.3MainInternationalCustomsandPractices

Astopaymentmethods,theapplicableinternationalcustomsandpracticesareasfollows:URC522meanstheUniformRulesforCollections,ICCPublicationNo.522,effectiveworldwidefromJanuary1,1996.UCP600istheUniformCustomsandPracticeforDocumentaryCredits,ICCPublicationNo.600.ISP98referstotheInternationalStandbyPractices,ICCPublicationNo.590.ItwaspassedonApril6,1998andbecameeffectiveworldwidefromJanuary1,1999.URCG325istheUniformRulesforContractGuarantees,ICCPublicationNo.325.URDG758meanstheUniformRulesforDemandGuarantees,ICCPublicationNo.758.Consistingof35articles,itcameintoforceinJuly2010.URR725meanstheUniformRulesforBank-to-BankReimbursementsunderDocumentaryCredits,ICCPublicationNo.725.Consistingof4partsand17articles,itcameintoforcein2008.URCB524istheUniformRulesforContractBonds,ICCPublicationNo.524.

GRIFmeanstheGeneralRulesforInternationalFactoring.Itisthestandardforcorrespondentfactoringrelationshipandgovernsmajorityoftheworldscross-borderfactoring.ISBPreferstotheInternationalStandardBankingPracticefortheExaminationofDocumentsunderDocumentaryCredits,ICCPublicationNo.745.ItisanessentialsupplementtotheUCP600.Incoterms2010referstotheInternationalRulesfortheInterpretationofTradeTerms,ICCPublicationNo.715.eURC:Ithas13articlesandtookeffectonJuly1,2019.eUCP:ItwaslaunchedbytheInternationalChamberofCommerce(ICC)topromotetheelectronicprocessofinternationaltradeonthebasisofUCP600forelectronicpresentation.Internationalcustomsandpracticescanserveassupplementstolawswhenthereisnodetailedregulationinlawsonacertainsubject.

Thefulfillmentofinternationalsettlementisbasedonthetransferoffundsamongcountrieswhichiscompletedbyaccounttransferamongbanks.Thus,itisvitaltoestablishanunrestrictedbankingnetworkacrosstheworld.

Theinstitutionsinbankingnetworkincludecorrespondentbank,branchbank,representativeoffice,agencyoffice,subsidiarybank,affiliatedbank,consortiumbank,etc.,amongwhichthecorrespondentbankisthemostimportantandwidelyemployed.1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement1.6TheBankingNetworkinInternationalSettlement

Whenalocalbankandaforeignbankprovideagencyservicesforeachotherunderanagreement,thetwobanksbecomecorrespondentbanksininternationalsettlementmutually.

Thecorrespondentbank,whichisanindependentforeignbank,hasnorelationshipofsubordinationbothinfundsandadministrationwithlocalbank. Ithastobenotedthatonlytheheadofficecanestablishthecorrespondentrelationshipwithforeignbanks.1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement1.4RoleofBankinInternationalSettlement1.6.1CorrespondentBankingRelationship

Traditionally,correspondentbankcanbedividedintotwotypes:depositorybankandnon-depositorybank.

Whenbankaccountsareopenedincorrespondentbanks,thiskindofcorrespondentbankiscalleddepositorybankinwhichfundsaretransferreddirectlybetweenaccountsofthetwobanks.

Generally,adepositorybankmustbeacorrespondentbank.largebankswithstrongfinance,outstandingreputationandadvantageouslocationarethebestchoice

Non-depositorybankmeansthatthecorrespondentpartiessetupnoaccountineachotherbutsettledebtsandclaimsthroughathirdbank.

Threestepshavetobetakenwhenestablishingcorrespondentrelationshipwithforeignbanks.1.6.2EstablishmentofCorrespondentRelationship123Step1:Creditinvestigation.Topickupacorrespondentbankinnumerousbanks,creditinvestigationisindispensableandessential.Step2:Negotiatingandsigningtheagreement.Onthebasisofinvestigation,thepartiesbegantonegotiateandeventuallysigntheagreementStep3:Confirmingcontroldocuments.Thecontroldocumentsexchangedbyeachothercontainsauthorizedsignatures,telegraphictestkeysandscheduleoftermsandconditions.

Authorizedsignaturesarethesignaturesamplesoftheauthorizedofficersofcorrespondentbank.Onlymarkedwiththesignaturesidenticalwiththeauthorizedsignaturesdothedocumentstransmittedbetweencorrespondentbankscomeintoforce.

Telegraphictestkeyistheconfidentialcodeinthebeginningoftelextoverifythattheteletextorcableisauthentic.Thetelegraphictestkeymustbechangedineveryonetotwoyearstoconfirmtheconfidentialityoftheinformation.

SWIFTtestkeyisusedespeciallyinreceivingandsendingSWIFTtelex.SWIFTtestkeymustbereplacedineveryhalfyear.

Scheduleoftermsandconditionsisalistofservicefeesthatabankchargesitsoverseascorrespondentforprovidingcorrespondentservicessuchascommissionsforconfirmingaletterofcredit,negotiatingaremittance,etc.

Intermsofchoosingcorrespondentbank,thesisterbanksareinthetopofthelist.Sisterbanksarethebranchinstitutionssetupathomeorabroad.Asanentiretywithsisterbank,thereexistsagreatadvantageinoperationalsecurityandthespeedofcapitalcollection.

Thesecondchoiceforcorrespondentbankisdepositorybank.

Thethirdisnon-depositorybank.Asakindofcorrespondentbank,non-depositorybankiskindoffamiliarwiththebank,buttheoperationprocessismorecomplicatedandmoretime-consumingforthefundstransferhastobefinishedthroughathirdbank.1.6.3TheSelectionofCorrespondentBank

Branchbankabroadisanoperationalinstitutionestablishedbyheadofficeofacommercialbankinaforeigncountry,whichissubjecttotheheadofficeinfinanceandadministration.

Theadvantageofbranchbankabroadisthatitcanofferservicesforbothdomesticandabroadbusinessofdomestictransnationalenterprisemeanwhileincreasingprofitabilitybyprovidingservicesforlocalenterprises.1.6.4OtherBankInstitutionsinInternationalSettlementBusiness

Representativeofficeisanon-operationalofficeestablishedbyacommercialbankinaforeigncountry,whichcannotconductnormalbankingactivitiesliketakingdepositsandmakingloans.

Agencyofficeisafinancialinstitutionestablishedbyacommercialbankinaforeigncountry,whichcanonlymakeloansandtransferfundsbutcannottakedepositsfromthehostcountry.Ithasnolegalpersonality. Subsidiarybankisalegallyindependentbankregisteredinthehostcountrybyadomesticcommercialbank.Holdingthewholeormajorityofshares,thedomesticbankhascontroloversubsidiarybank,however,alloperationsofsubsidiarybankhavetocomplywithlocallawsandregulationsandbesupervisedbytheFinancialSupervisoryAuthorityofthehostcountry.

Affiliatedbankismuchsimilartosubsidiarybankforitisalsoalegallyindependentb